OT:Prepaid Mastercard/Visa as budget tool???

Just a question for you all. Now that we've got our budget sorted out, we want to be sure to stay out of that unholy black hole called debt.

Many budget gurus tell you to use a debit or checkcard from your bank to pay for groceries and other budgeted purchases. I'm looking for a different approach. I am fearful of doing this because we pay for bills out of our checking account. (I only like to keep enough money in there to pay bills with. Anything else goes into long-term savings. ) Paying for groceries and such, which I feel is a variable not a fixed cost, could result in budget overruns. Of course, if you use more than you have money by mistake, the bank won't just deny the purchase. They'll let you go over the limit and charge you for it. That's another rant for another day. I don't want to get a separate checking account because it would be a pain in the booty to keep up with. Don't want to use another cc for obvious reasons (they're going in a sock in the back of the sock drawer).

So I've been pondering whether we should get rechargeable prepaid Visa/MC cards to put these purchases on. That way, I don't have to carry cash, which I think is too risky for a number of reasons. Has anyone done this? Does it work? ANy drawbacks? People here seem to do well with them while on vacation, but I wonder about how well they'd work for every day use as a budget "leash," if you will. Can you get two cards that link to the same account (one for DH and one for me)?

Well I use a prepaid debt card frequently to pay for on-line purchases and things like my Netflix, things that I absolutely have to have a card for. I don't use my one credit card for these things because a) my available balance isn't big enough for paying large purchases (Like Disney!) and b) I have a bad habit of not paying off reoccuring expenses (like Netflix) thinking that I'll "catch up" next month. But with the prepaid debit it forces me to have the money in hand, prior to spending. I also tend to think a little longer before I whip out my debit card, then I do about spending cash. Mostly because I earn cash daily so it's just like water to me sometimes. So if I have a good day I plunk it onto my card right away - out of sight, out of mind for me.

The one drawback to using the debt card is the cost. Your options are to pay a "per use fee" which is usually about $2-3 dollars per. Or to do a flat monthly fee, with my card it's $10. To me that's worth it. I use it often enough that I come out ahead with the monthly fee. And it's less then the interest I'd probably accrue using a credit card. YMMV

It would work, but keep in mind that when you use a card, there is not the same emotional effect happening as when you use cash. It is much easier to swipey-swipe for $100 then it is handing over a Franklin. Several studies show consumers spend at least 12-15% more if they swipe over cash at grocery stores. Vending machines that take cards have 300% or more for credit transactions and fast food numbers are high as well.

Cash isn't any more risky to carry, thieves don't have x-ray vision. You may consider just taking enough to the store for each visit which is normally $40-100 for us. Our spending went down dramatically once we forced ourselves to look at each dollar, not just numbers on a computer.

For us, this is the reason why "rewards" cards do not make sense. If we need $25,000 in spending for a free ticket and we even spend 12% more than with cash, the "free" ticket actually costs us over $2,678 in additional spending. Some people can avoid extra spending, but if you look at the number of places that are racing to take credit cards and the billions spent marketing things, the numbers are stacked against you.

I don't like the prepaid cards. Mainly because you can only have one person use them AND when you get to the bottom you have to know what exactly you have on there for it to work. We got some money from the ILs last year, except as a change last year they decided to put it on a prepaid Visa. MIL was thinking that would be easier to do, but changed her mind before the cards were even in our hands because she found out about the restrictions. We took ours on vacation to use for gas expenses, but that meant DH had to pay all the time instead of one or the other of us just signing a traveler's check or using cash and we got down to 40 some dollars and the last charge for gas would not go through since it was a bit over what was left on the card.

Have you heard of the envelope system? I don't use it for everything but since I try to do a lot of my shopping at Aldi and have to use cash there anyway, I find it helps a lot for groceries. And as Stein mentions, it "hurts" a little more to pay with cash.

Not all prepaids are like this. I've had my mom and my daughter use the card. they just needed to know the pin number. My card also has a feature where they text message you with the balance free of charge. Every time I use it, I get a text message on my phone with the current balance.

I've also found a way to get around the gas issue. Most gas stations will "pre-approve" the card for the amount of $50 before they let you pump. If you only have $40 on the card and only need to put $20 in the tank; the $50 thing will be a problem. But if you go into the station and prepay for a specific amount (the $20) then they don't do the pre-approval thing.